Swap and Carry Calculator
Swap, or carry, is the interest difference between the two currencies in a position, credited or debited each night it is held open. It is small daily and meaningful over months, and a price move can erase a year of it in a week.
What the overnight hold pays
Defaults hold 100,000 of notional across a 2.5-point rate difference for 30 days.
A negative rate difference means the position pays rather than receives, which is the same trade held the other way round. Your broker quotes its own swap number rather than the market rate, and the two are not the same.
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How the number is built
One multiplication and one division. The division turns an annual rate into the fraction of a year the position was actually open.
Carry = notional × rate difference × (days ÷ 365)
A currency position is two positions. You hold one currency and owe the other, so you receive interest on one side and pay it on the other, and the carry is what is left.
A worked example
Take the defaults: 100,000 of notional across a 2.5-point rate difference, held 30 days.
Over a full year that is 100,000 × 0.025 = 2,500.
Per day it is 2,500 ÷ 365 = 6.85.
Over 30 days it is 205.48 — 0.205% of the position.
6.85 is not a reason to take a trade and 2,500 might be. The whole character of carry is that it is invisible daily and material annually, which is why it is easy both to ignore and to overweight.
The direction matters and it is not symmetric
Reverse the position and the sign flips, so a pair paying 2.5 points one way costs 2.5 points the other. That is the arithmetic; the practice is worse.
Brokers apply a margin to both sides, so the paid rate is usually smaller than the theoretical one and the charged rate is usually larger. A pair with a genuine 2.5-point difference might credit 1.8 and debit 3.2 at the same firm.
That asymmetry is the real cost of holding overnight and it does not appear on any rate table you can look up. It is in your broker’s swap schedule and nowhere else.
Triple swap and the weekend
Currency settlement runs two business days ahead, so one weekday each week carries three days of swap to cover the weekend. On most pairs that is Wednesday.
On the defaults that day is 20.55 rather than 6.85, and if the carry is negative it is a charge three times the usual size on a day nothing appeared to happen.
Holidays shift it, so the triple day is not always where the schedule says.
What overwhelms it
A year of carry on the defaults is 2,500, which is 2.5% of the notional. So a 2.5% move against the position removes a full year of it, and nothing about the carry slows that move down.
The spread is a separate cost and it is paid up front. The carry on the defaults works out to about 48 a week, so a position held for a week may pay more in spread than it earns in carry.
The pairs with the largest rate differences are usually the least liquid, which means the widest spreads and the widest broker margins. The carry that looks most attractive is attached to the trade that is most expensive to hold.
Carry against leverage
The number that changes how this reads is the one the calculator does not ask for: your deposit. Carry is computed on the notional, so $100,000 of exposure pays $2,500 a year whether it was funded with 100,000 or with 5,000 of margin.
At 20 to 1, that 2,500 is 50% of the $5,000 deposit rather than 2.5% of the position. The rate difference did not change and the return on the money at risk changed by a factor of twenty, which is exactly how carry strategies come to look attractive.
The losses scale identically. At 20 to 1, the 2.5% adverse move that cancels a year of carry is 2,500 — 50% of the $5,000 deposit — and a 5% move takes all of it.
So leverage does not improve a carry trade — it enlarges it. The daily credit gets more visible and the adverse week that removes a year of it arrives sooner.
The original data
Of the 24,971 unique videos in the search study behind this site, 1 has an instruction-shaped title about swap and carry, at 1,085 views. Forex appears constantly in the corpus without the overnight cost ever being computed.
One video, 1,085 views. Every leveraged currency position pays or receives this every night, and it is among the least covered subjects in the entire study — which is a fair summary of how holding costs are treated across retail trading generally.
The question: The carry is positive. Hold it for the interest?
The answer is that positive carry is a reason to prefer one side of a trade you already wanted, and not a reason to take the trade. 2.5% a year is a thin return against a position that can move several percent in a week. Carry is a tiebreaker, not a thesis — and the trades where it is large enough to be a thesis are large enough because the market expects the price to move against you.
When it fails
The structural failure is that carry accumulates gradually and unwinds violently. A position collecting a positive rate difference tends to be crowded, because everyone can see the same arithmetic — and when conditions change, everyone tries to exit at once. Months of small credits are removed in days, and the calculator reports a comfortable $2,500 a year right up to the point that happens.
The second failure is using central bank rates instead of your broker’s. The margin is the whole difference.
A third is forgetting the triple-swap day. A negative carry costs three times on it.
A fourth is ignoring leverage. Carry is charged on the notional, not on your deposit.
A fifth is assuming the rate holds. Central banks change policy and the swap changes overnight.
And a sixth is treating it as income. It is a cost of financing that happens to be positive.
Related
Forex is the market this applies to. Leverage is why the notional is larger than the deposit. And interest rate is where the difference comes from.
The thing to check before building anything around carry is your broker’s actual swap table, not the central bank rates. The gap between the two is the broker’s margin and it varies more between firms than the rate difference itself does — which means the same trade can be positive carry at one and negative at another.
— Michael Whitman
This page is educational, not financial advice. Test every idea on your own charts before risking money.